hey there. we are live at the nasdaq marketsite in times square we have a big show ahead the guys are getting ready for that right behind me meantime, here's what's coming up ♪ when you wish upon a star >> it's not just a wish. disney shares are near one-year highs and carter worth says the charts are pointing to more when the company reports earnings next week. he'll break it down. plus -- how would you like to get long shares of amd for next to nothing? >> nuttin' >> yes, nuttin'. dan nathan will explain how to do it.

and -- as one social star tumbles, traders are eyeing one for next week. and here's a hint -- the snap trade. it's time to risk less and make more the action begins right now. sure does. let's get to it because next week is all about media earnings and disney in particular the stock has been on a magical rally closing out its fourth straight week in the green, the longest winning streak in nearly three years with shares just below the 52-week high how should you play it into the report let's get straight to the chart master >> just as you suggested, disney is the three-year chart, the

underperformance disney in blue basically no progress in three years, equities in general as measured by the s&p have gone higher and higher. if we just put a highlight there, that is the set-up. underperformance but disney has come to life of late let's move on. here is the chart of disney. no judgments or annotations by me let's put in some lines. one way to look at it would be as follows head and shoulders bottom and the inference would be that ultimately we would get to the high and then we would break out. another way to draw the lines would be as follows. a cup and handle but the same proposition that we're back to a high, contending with a high, then we are setting up for a presumptive breakout. another way to draw the lines. a wedge meaning if the same principle -- tension at a former high the presumption is -- okay let's pull it back a little bit

longer term. here is the dull period, the dead period. let's draw some lines on that. if you zoomed in here, what's happened is we've actually broken above the upper band of that wedge that's the beginning let's pull it back even further. here's really long term. going back to a period where disney was dead, came to life, and then is dead again are we about to reassert ourselves? put in the lines again we are just starting to move above that key upper band what i'm thinking here is pretty big move again, i like the outperformance of 9% in the past month with the precondition of three years of underperformance >> what's the did iz in you tra disney trade >> almost three years ago disney had that earnings disappointment

in summer of 2015 and it basically sort of lost all of its mojo it's traded right back essentially to that exact same level. what's interesting is that around that time, the company made just over $5 in eps, probably going to do over $7 now. you are buying the stock with 40% more earnings with 2015 for the same price it is trading at a discount to the broad market i like that. options though premiums are elevated going into earnings they are obviously always going to be that way but even more so now than usual it is implying a 4% move above the 3.3% it usually does i think we should take advantage of that elevated premium and look to sell the august $115 call and use that premium to help purchase the october calls. you have the august options which have two weeks to expiration and october options which have more than two months to expiration. they are only double the cost. the idea here is that those

short dated options will decay, we'll obviously mitigate the cost of that elevated option premium and get to take a longer term bullish bet on a stock at a lower cost >> i think this prayed makes a lot of sense we talk about calendars. you are threading a needle a little bit if carter is right and you get that breakout, this is not exactly the right trade to have on what mike's saying i think is he's positively inclined from a fundamentals standpoint but you could see the thing consolidate a little bit around $115 and move above that you still make money. below it, if it doesn't go too far, you still own that october $115 call which will be the level it breaks out. from $115 right to $122 which was the all-time high three years ago. >> but the tension is there. that's what makes a good trade it could all be a bust, go the wrong way. but the set-up is right. because you do have these multiple formations, head and shoulders bottom, a pennant, cup and handle, and have you that long-term setup. again, it is up 9% in the past

month beating the market having underperformed it is quite right i think for something special. >> i think the critical point i would make sheer is thhere is tf the move is already done if i thought it was going to be a sharp move i wouldn't be selling any options at all now to the hottest tech stock of the year. that's advanced microdevices the chip stock is up 80% in 2018 and hitting its highest level in more than a decade earlier this week dan, you think it could be right for a further breakout >> last week this company guided below where street consensus was but it didn't matter the stock went up. for a stock that's up 80% on the year, acting really well despite bad news, makes me feel like something's kind of going on here an $8 billion market cap it's got a really great balance

sheet just not a whole heck of a lot of debt. net just a few hundred million the thing is doing better than intel and a bunch of areas something that it hasn't done in a long time. i think this is really important. there was a time last year when these guys were growing sales in chips for crypto mining. the company just guided the second half of this year to crypto mining sales down 50% you basically take a lot of risk out of that being something that could draw the stock down. it could be a huge -- it could be a huge tailwind if it were to go up. to me i just thing kind of the stock acts like there's somebody who wants to take it out so to me i don't want to buy a stock at $18.50, that was trading $9 earlier in the year but i want to create options to set up a structure where i am not paying a premium but i have leverage to an upside move october expirations, the stock was trading at $18.50, you could

sell a put and use the proceeds to buy it out of the money call spread it and specifically looking at october you could sell the october 16 put at 55 cents and use the proceeds to buy the october 21, 25 call spread for 55 cents. as the stock goes up toward the 21 strike the calls appreciate around the put you are short will depreciate and you should have gains on a market to market basis. between 21 and 25 you can have gains up to $4 worst case scenario is that the stock is at $16 or lower and you are put 100 shares per 1 put that you were short. that's the case scenario, that's down about 14% from current levels just one point -- when you say $25, i have a couple charts here that kind of help me inform these strikes. here's a 5-year chart. it shows you how important this '15-'16 level was. that's probably a level i would be okay buying the stock look at this chart since 2000.

it shows you just how important that level is and if this thing gets going -- there really is takeover chatter going on, this is going to be up 30%, 35% >> you use the '16, that's the level in which it backed up those earnings worst case having a put to you there is really practically an excellent entry point if one weren't anticipating it. the way this looks it is just about to sploexplode. >> the stock has gone up one thing you didn't point out is that options premiums respect cheap in this thing at all which is the reason you want to be short that call and short that put. you look to sell more options when premiums are elevated take a look at the cost of the october straddle in this thing $2.50 on an $18 stock. the stock has to move substantially if you are just an outright premium buyer if it just sits here you are likely to see profits here as

those wing options decay more rapidly. >> i want to make a point about the stock up 80% of the year the best performing stock in 2016 in the entire s&p, the best performer in 2017 -- nvidia. that's one of their biggest competitors in a lot of different areas. ai, cloud computing, servers i think this is an asset that's kind of too dollar cheap to me the price abc news speaks to something else that's going on here. >> for everything options action, check out our website, optionsaction.cnbc.com sign up for our newsletter it is what i'll be reading this weekend. here's what's coming up next -- >> oh snap >> you won't believe just how much traders see snap moving when the social giant reports next week. plus, calling all options action fans. reach in your pocket, grab your phone and tweet us your

question @optionsaction. if it is nice, we'll answer it on air when "options action" returns. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade tap one little bumper and up go your rates. what good is your insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today.

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a new kind of wireless network designed to save you money. visit your local xfinity store today. (sighs) i hate missing out missing out after hours. not anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, with td ameritrade. ♪ welcome back to "options action." snap reports earnings options next week. what can we expect, julia? >> when snap reports second quarter earnings tuesday

afternoon investors and analysts will be looking for signs of momentum after user growth and revenue fell short of expectations last quarter. analysts expect snap to grow revenue 38% year over year to $251 million they also expect the company to lose 17 cents per share in the quarter. that's a creone cent more than e company lost in the year ago quarter. they are placing a 17% move in either twitter have suffered since their earnings reports after a greater focus on safety and security impacted their bottom line raising concerns that snap may suffer from similar trends, particularly when it comes to slowing user growth since snap's ipo last march, the stock is still down 25% webb bush analysts are still concerned adjusting lower to

reflect weaker daily user growth we'll see what the ceo says about gaming and other categories that could drive growth michelle, back over to you >> thanks, julia boorstin. gibb the moves that we saw in facebook and twitter out, should you ghost snap into earnings mike >> we're going to take a look at doing a put calendar kind of like disney but maybe on steroids in some respects. options are very expensive and julia just pointed out implying a 17% move in either direction on earnings. that means you'll make a directional bet, just doing it outright is going to be too expensive. one other quick point. this is true also of tesla you have a very high short interest what that could mean is it could create some level of support if there is a disappointment. we'll try to play that as well finally just looking at the thing fundamentally julia also just spoke to that, looking at the active user rates, but also the ad costs which has also been

weak we can look at the chart here. i'll let chaarter speak to that. this doesn't look very good to my eye though. specifically i was taking a look at the august-january 12 but spread you could sell for 75 cents. the january puts are almost double that cost at $1.55. basically you'll spend just 80 cents to do that some important points about that, by selling that very expensive near dated option we are improving the likelihood this trade is going to be successful first if the stock doesn't move that much at all you will make money because of the decay in the longer term, it doesn't need to fall as much to collect the 75 cents 90% chance it hits $12 75% chance it hits $11 but to get to $10 which is where you would need to buy the january put outright the probability is much lower.

so we try to improve our odds of success, factoring in that short interest >> what do you think of mike's strategy >> the company's been public for five quarters and moved on average 25%. only one quarter it's been up, and when it was up it was up almost 50% mike's probably paying for a little less than average move over the last five quarters. i think the fundamental point you focus on, obviously, users an revenues. they have a new cfo. they brought this gentleman in from amazon. i think the way he guides will really set the course for the next few months. i think that's the most important thing to watch for >> carter? >> you said it right there anything that's basically going up and to the right is good. anything that's going down and to the right is bad. sometimes it is as elemental as that and that's going down to the right. it's got some gaps

most recent gap is down. your first day in life is your best day, if that's it, you're never good >> you pointed out they've only had five quarters of earnings results and they have had some fairly sharp moves on those earnings that's fairly typical. if you have an ipo the first few earnings result is where you'll see the most violent moves, doesn't make if it is a big company like facebook or smaller one like snap. over time investors become more acclimated to the stock and expectations are basically more measured so you don't see as big gaps which is why you have a 17% implied move but it might look small in a historical context. >> this is a volatility trade for all intents and purposes the worst case scenario, the premium you have at risk, selling the short data, what's the worst case scenario? how could that get wiped out if you had some crazy sort of -- >> if the stock gaps sharply higher that would be the worst possible

case the worse possible case is 80 cents for a stock that moves as much as this one does is not a huge amount of risk. tesla posts its best week in five years up more than 17%. so is the stock finally back on track? plus, you got a question for one of the traders send a tweet to @optionsaction if it is nice we might read it later in the show. live at the nasdaq in times square there's more p"options action" right after this break eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

omar, check this out. uh, yeah, i was calling to see if you do laser hair removal. for men. notice that my hips are off the ground. [ engine revving ] and then, i'm gonna pike my hips back into downward dog. [ rhythmic tapping ] hey, the rain stopped. -a bad day on the road still beats a good one off it. -tell me about that dental procedure again! -i can still taste it in my mouth! -progressive helps keep you out there. -i can still taste it in my mouth! well, it'sonce again.eason >>yeah. lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point.

that way you can keep your eyes on the big picture. >>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade. tesla's back on track. by drawing people back in, now undercutting the line, the real risk is that ultimately we are going to now crack in a big kind of way this is not a good set-up. >> i am looking at september i could sell that for $10.40 >> than didn't go exactly as

planned. tesla just had its best week in five years mike, what do you do with that trade now? >> for those of you who follow us on twitter -- and you should, this is one of the reasons why -- you'll know that the day after those earnings results came out we waited for the stock to open and see how it traded. it actually started to trade higher than it did overnight that to me was a signal that we were clearly wrong on this i closed the position at that point and it has since gone significantly higher on a fundamental -- i done think the fundamental story has changed that much. in the short term it is a podium machine in the market and in the long term it is a wait machine and the wait decision hasn't been determined yet. >> it cracked in a big way, popped in a big way. when you go up 23%, all you can do is simply return to where it was the first trading day of july nothing's changed. i would stay short is there this is a real battleground stock here. it is really a trader's delight. you are getting these

opportunities at levels very well defind. $280 on the down side, $360 on the up side. have a ball and trade it >> two weeks ago you said it was time to unfriend facebook. >> the options market implies a 5% move in either direction. hayes $30 billion in market cap. if you are long the stock thinking about short term projection to move back to the breakout level i think that makes sense. august expiration the stock was trading at $210, you could buy the august $210 for $7 >> facebook did a face plant, the stock plummeting 15% since your call. >> tesla overshot its implied move but it was a $45 billion market cap before this facebook was one of the largest stocks in the world, about $700 billion it lost $120 billion the next day. those are unexpected moves

this was the $210 190-put spread it's trading like stock basically the puts you basically have no reason to keep this on you take it off and you move on. >> it is price discomfort. the magnitude of the drop and dropping below $170. today right where we opened on the first print after the bad news it belongs here, meaning anticipating it, brilliant but now that it's happened it is not a buy or a sell. sometimes stocks belong where they are that's facebook. fair price >> i think it is an interesting candidate for possibly selling puts or something like that. i feel like it's found a new level here further weakness here i am kind of discounting that somewhat this might be one of those things if you have to own the stock you could think about selling some cover calls coming up next, your tweets and the final call

oh, and there's the closing bell. (sighs) i hate missing out missing out after hours. not anymore, td ameritrade lets you trade select securities 24 hours a day, five days a week. that's amazing. it's a pretty big deal. so i can trade all night long? ♪ ♪ all night long... is that lionel richie? let's reopen the market. mr. richie, would you ring the 24/5 bell? sure can, jim. ♪ trade 24/5, with td ameritrade. ♪

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only with td ameritrade. it is time to take a tweet we have a question from cnbc super fan who says, august is historically a dead month for volatility and we're already seeing lower vol what's a good options strategy if you think there could be a surprise volatility spike in august >> i think that's a great question i would look at september options. august is typically the most expensive time to rent if you're getting a house in the hamptons but it is pretty much the cheapest time to representative. if you're thinking about buying options. i would take a lookout to september, somewhere between the $22 370 and 280 puts >> i want to let ivan know that mike rehearsed that whole hamptons thing during the break. final call time.

carter >> disney long like it for a breakdown. >> calendars in disney >> amd >> that does it for us here on "options action. don't go anywhere. you know why because jim cramer and "mad money" starts right now. >> announcer: the following is a paid advertisement for online trading academy. you've heard it over and over again. if you want financial freedom, you have to invest in the markets. it's true that the wealth created in the financial markets has transformed more people into millionaires and billionaires than ever before. why is it that only wall street and a select few investors get richer and richer while the everyday investor lags behind? how is this possible when both groups are investing in